Jakarta’s plan to get more public power in water sector might not work well

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Research Associate at the ASEAN Studies Center, Universitas Gadjah Mada

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The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

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The recent Supreme Court decision prioritising human rights and the state’s control over water sources seems to be “fresh air” for universal water access in Jakarta. Nevertheless, it wasn’t a complete reversal from privatisation.

The ruling did, however, pressure public water company PAM Jaya into an “internal restructure” of existing contracts. The restructure will set new contracts for Jakarta’s two private pipe operators: Palyja and Aetra. PAM Jaya’s Director, Erlan Hidayat, said this will be complete in March 2018. PAM Jaya will take over raw water provision and customer billing while the operators will handle water treatment and the process of pipe installation.

But, the restructure is minor as the public company is only partially managing the water sector. It will still have to pay the operator’s production costs, the most expensive part of water service provision.

One explanation for this problem is the poor water management system. Another reason is the privatisation of water services in Jakarta, which has created an imbalance of public and business interests. This has increased water prices, forcing vulnerable communities to use a big chunk of their own income to pay for clean water.

History of privatisation

The privatisation of water services in Jakarta began in 1991 under the Water Sector Adjustment project with a $92 million loan from the World Bank. It was a project to find a “way out” from the major problems surrounding Jakarta’s water supply system management, including the low quality of water, a lack of investment, and vulnerability to corruption.

The 20-year concession contracts were signed in 2001 with two water multinationals, Suez (France) and Thames (UK), after an initial agreement in 1997. Once these contracts were enforced, Jakarta transferred the service to the private sector, entrusting them to regulate the city’s water supply.

In addition, pipe installation concentrates on Jakarta’s middle to upper class residences. Data from PAM Jaya showed that just over 55% of water distribution in the city’s west was targeted at middle-upper income households, condominiums and commercial interests.

Meanwhile, in low-income areas, water outages can last for days.

During a interview with us in January 2017, Urban Poor Network’s coordinator, Eni Rochayati, said water scarcity in North Jakarta’s densely-populated Penjaringan was an issue people had dealt with for years without any adequate solution.

From profit to service

With remunicipalisation now taking place, PAM Jaya and the government must shift their attention to a service-oriented rather than profit-driven water system, and retain control of Jakarta’s water sector.

Full ownership or control over the provision’s key operations is one option. Another is adopting a blueprint to strengthen cooperation among government stakeholders.

PAM Jaya and the government must develop a "road map” to establish a coherent plans on infrastructure development, financial arrangement, and human capital. But they should also ensure advanced participation and transparency mechanismsaccompany the process.

Twelve-thousand kilometres away in Europe, Paris offers one lesson in creating a transparent space for customers and citizens to monitor water services.

When it remunicipalised its water sector in 2010, the French city used remunicipalisation to strengthen its citizen engagement. It established the Paris Water Observatory to make a space for citizens to observe, collect information, and keep water service administrators publicly accountable. With strong community participation, the city is striving to create an egalitarian water management system.

Jakarta can deliver efficient and effective service performance for its residents, ensuring universal access to sanitary water, but must keep examples like Paris at the forefront of its thinking.